CHINESE households, traditional savers with an aversion to debt, are rapidly warming to the idea of borrowing to buy a car, as automakers push financing deals to boost sales and margins in an increasingly competitive market.
Nearly 30 per cent of Chinese car buyers bought on credit last year, up from 18 per cent in 2013, according to analysts from Sanford C. Bernstein and Deloitte, helping a rebound in the car market after a sticky 2015.
That is welcome news to China’s government, which wants consumers to borrow and spend more to shift its slowing economy away from heavy industry and investment-led growth.
Beijing resident Wang Danian said he planned to buy his first car on credit, saying it was the smart move.
“I can use my cash to do other things,” the 28-year-old said while looking at an FAW Besturn X80 sport utility vehicle. “If I use all my savings at once to buy a car, and then something happens, I can’t manage the risk.”
Six consumers interviewed by Reuters said they would all consider loans, lured by low-fee and interest-free deals, with half saying they’d prefer to buy on credit and save cash for other items.
“I’d estimate after the manufacturer came out with the low-interest deal that about 30 per cent of potential cash buyers switched to buying on credit,” said a salesman at a Volkswagen (VOWG_p.DE) dealership in eastern China’s Jiangsu province who gave his name as Mr Zhao.
That is still a far cry from the more than 80 per cent of cars bought on loans in the United States, but Deloitte predicts China will reach 50 per cent by 2020.
Global automakers have struggled to encourage this trend for some time; Volkswagen established its finance subsidiary in 2004, but was held back by strict regulations on underwriting loans and sources of funding.
